Greece about to default

[werepossum]

No, that's not the case at all. I don't own any Greek debt currently. Other people do. Their goal is the return of their principal, which is a fundamentally different calculation. Accepting a small loss or delayed payment is far better than nothing at all, while jumping into an investment now is not something I would do. Furthermore, I wouldn't buy their debt now in large part because of the foolish austerity plan the troika is trying to implement, which I have no control over.

I'm not sure how this is hard to understand?

Accepting a small loss or delayed payment is not at all "far better than nothing at all" in this case because it requires loaning them even more money. It's called throwing good money after bad. You can look it up. It's kind of a thing.

And I remain boggled that you would consider the prospect of yet another mark-down on debt already marked down 50% as "a small loss", especially when that is wrapped up in loaning them even more money. I remain unconvinced you would consider it a small loss if it were your money. But hey, you are correct that it's not at all hard to understand; other people exist to further the ideology. At least until you run out of other people's money anyway.

 

[glenn1]

Accepting a small loss or delayed payment is not at all "far better than nothing at all" in this case because it requires loaning them even more money. It's called throwing good money after bad. You can look it up. It's kind of a thing.

And I remain boggled that you would consider the prospect of yet another mark-down on debt already marked down 50% as "a small loss", especially when that is wrapped up in loaning them even more money. I remain unconvinced you would consider it a small loss if it were your money. But hey, you are correct that it's not at all hard to understand; other people exist to further the ideology. At least until you run out of other people's money anyway.

Maybe instead of understanding it as good money after bad, he's employing the Gambler's Fallacy. Greek creditors and proponents of "stimulus" have been wrong so many times in a row, their side must "be due" and the debt will get paid in full if only they place their bets just once more.

 

[werepossum]

Maybe instead of understanding it as good money after bad, he's employing the Gambler's Fallacy. Greek creditors and proponents of "stimulus" have been wrong so many times in a row, their side must "be due" and the debt will get paid in full if only they place their bets just once more.

lol

 

[nickqt]

The Germans and other creditors realize their principal is lost either way. The primary concern now is to keep the principal amount lost from rising further by eliminating further bailouts and throwing good money after bad. When even the New York Times is telling the Greeks they fucked up...

http://www.nytimes.com/2015/07/02/u...usterity-debate-it-failed.html?abt=0002&abg=0

Hint: if there aren't any more bailouts related to interest on the principle, then the entire principle is lost. Which is, like, the entire reason why bailouts are even remotely possible in the first place.

 

[fskimospy]

Accepting a small loss or delayed payment is not at all "far better than nothing at all" in this case because it requires loaning them even more money. It's called throwing good money after bad. You can look it up. It's kind of a thing.

And I remain boggled that you would consider the prospect of yet another mark-down on debt already marked down 50% as "a small loss", especially when that is wrapped up in loaning them even more money. I remain unconvinced you would consider it a small loss if it were your money. But hey, you are correct that it's not at all hard to understand; other people exist to further the ideology. At least until you run out of other people's money anyway.

They are being loaned additional money by those governments that they then use...to pay their own banks and governments. They are loaning Greece their own interest payments. That's what Greece having a primary surplus means.

Are you doing the thing again where you pretend inconvenient statements don't exist? The reason I said I wouldn't invest my money there has to do with the ruinous conditions that are being imposed by those countries that I have no control over. That is literally the opposite of the case for Germany.

So again, what is so hard to understand about this?

 

[fskimospy]

Maybe instead of understanding it as good money after bad, he's employing the Gambler's Fallacy. Greek creditors and proponents of "stimulus" have been wrong so many times in a row, their side must "be due" and the debt will get paid in full if only they place their bets just once more.

This is baffling. I'm not sure if you have been paying attention or understood what you read, but people advocating for fiscal and monetary stimulus over the last seven years or so have seen about as unambiguous a victory as you ever see in economics.

Like, there are shedloads of papers written about this. It's not a secret. Do you just hope if you pretend they aren't real that the Hated Keynesians won't be right and they can't rub how wrong you were in your face or something?

 

[Greenman]

This is baffling. I'm not sure if you have been paying attention or understood what you read, but people advocating for fiscal and monetary stimulus over the last seven years or so have seen about as unambiguous a victory as you ever see in economics.

Like, there are shedloads of papers written about this. It's not a secret. Do you just hope if you pretend they aren't real that the Hated Keynesians won't be right and they can't rub how wrong you were in your face or something?

The bottom line is that everyone with money to loan doesn't want to loan it to the Greeks, and are even risking losing the money they've already lent them. If what you say is true, all that has to happen is the EU needs to lend Greece whatever amount it takes to get their economy going. Obviously, no one is doing that, why? If the answer is in the papers you speak of, or it's been done often and works, why wouldn't the EU do it in Greece? Then do Italy, Ireland, and all the rest? Why is it that the people creating financial policy in the rest of the world don't know as much as you? You're also the only one I've seen who consistently blames the issue on the money lenders and not the money spenders.

I know very little about economics, so I can't debate financial policy with you, but based on the evidence so far, it looks to me like you're blowing smoke.

 

[fskimospy]

The bottom line is that everyone with money to loan doesn't want to loan it to the Greeks, and are even risking losing the money they've already lent them. If what you say is true, all that has to happen is the EU needs to lend Greece whatever amount it takes to get their economy going. Obviously, no one is doing that, why? If the answer is in the papers you speak of, or it's been done often and works, why wouldn't the EU do it in Greece? Then do Italy, Ireland, and all the rest?

Because this is political as well as economic. Germany and others are worried if they give in to Greece that other countries will also want similar deals and they simply don't want to pay for it. (the other countries have more sustainable debt loads so losing their investment is less likely) A lot of it is also ideology. Germany wants to enforce political and economic reforms on Greece and this is the biggest lever they have. If you put Greece back on its feet, they don't need to listen to you anymore.

As for the studies on this, I can link you to lots of them if you care to read about it. Probably the biggest and most important one on the issue is one released by the IMF a few years back that showed fiscal multipliers were likely well above one during the early parts of the crisis. (Greece still looks a lot like this)

https://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf

A fiscal multiplier above one means that for every $1 in spending you cut the economy shrinks by more than $1... meaning that spending cuts are self defeating. If you look at the charts I linked before you'll see that this has played out in Greece as the cuts they implemented have resulted in VASTLY more economic contraction than previously predicted.

Why is it that the people creating financial policy in the rest of the world don't know as much as you? You're also the only one I've seen who consistently blames the issue on the money lenders and not the money spenders.

Lots and lots of people involved with financial policy around the world are saying exactly the same thing I am.

I know very little about economics, so I can't debate financial policy with you, but based on the evidence so far, it looks to me like you're blowing smoke.

What evidence are you referring to? I'm pretty sure I'm the only person who has provided literally any evidence at all. The rest have just been fact free statements of ideology.

 

[glenn1]

Oh, more hand-wringing from the stimulus fetish crowd. Too bad for you that Germany isn't buying your chicken little predictions about the sky falling unless creditors dial back on spending reductions and entitlement reform. It must really suck when the premise your entire worldview depends on crumbles before your eyes because the creditors paying for it no longer agree to participate in your charade.

Germany is taking the exact correct approach. Greece has argued that "if we go down, so will Germany and other creditor nations." Those creditors are now saying in return "we're going down anyway, but I'll get the pleasure of seeing you go down first." The only thing salvageable from lending to the Greeks and inevitable loss of their principal (and refusing to throw good money after bad and add more capital to the eventual loss) will be the humbling of Greece and deadbeat creditors and setting the precedent for future debtors that there will be no debt jubilee coming and yes, you will pay your fucking bills when due.

 

[werepossum]

Because this is political as well as economic. Germany and others are worried if they give in to Greece that other countries will also want similar deals and they simply don't want to pay for it. (the other countries have more sustainable debt loads so losing their investment is less likely) A lot of it is also ideology. Germany wants to enforce political and economic reforms on Greece and this is the biggest lever they have. If you put Greece back on its feet, they don't need to listen to you anymore.

As for the studies on this, I can link you to lots of them if you care to read about it. Probably the biggest and most important one on the issue is one released by the IMF a few years back that showed fiscal multipliers were likely well above one during the early parts of the crisis. (Greece still looks a lot like this)

https://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf

A fiscal multiplier above one means that for every $1 in spending you cut the economy shrinks by more than $1... meaning that spending cuts are self defeating. If you look at the charts I linked before you'll see that this has played out in Greece as the cuts they implemented have resulted in VASTLY more economic contraction than previously predicted.



Lots and lots of people involved with financial policy around the world are saying exactly the same thing I am.



What evidence are you referring to? I'm pretty sure I'm the only person who has provided literally any evidence at all. The rest have just been fact free statements of ideology.

It's worth pointing out that none of the people saying Greece should be loaned more money are stepping forward to loan Greece money. As always, progressive economic policy is best carried out with other people's money. It's also illustrative that those nations with the highest deficits are those in the worst economic shape.

Now that Greece has given up pretending to pay its debts, it's free to leverage that supposed primary deficit. Should be nirvana any day now.

 

[theeedude]

I love how Greeks are painted as unreasonable and the creditors as serious.
Austerity not just failed, but damaged the Greek economy into a depression, but the creditors are asking for more.
Greek debt is unsustainable, the creditors are in denial, aren't putting debt reductions on the table unless Greece implements more failed austerity, which would make the debt even more unsustainable by damaging Greek economy further.
But they are considered by the financial media who should know better to be serious parties, whereas Greeks who are just pointing out what should be obvious are considered intransigent and unserious.

 

[werepossum]

I love how Greeks are painted as unreasonable and the creditors as serious.
Austerity not just failed, but damaged the Greek economy into a depression, but the creditors are asking for more.
Greek debt is unsustainable, the creditors are in denial, aren't putting debt reductions on the table unless Greece implements more failed austerity, which would make the debt even more unsustainable by damaging Greek economy further.
But they are considered by the financial media who should know better to be serious parties, whereas Greeks who are just pointing out what should be obvious are considered intransigent and unserious.

The same austerity measures got Ireland, Spain and Portugal back to fiscal solvency. One can always argue that had someone thrown even more deficit spending at them they would be even better off - that is unknowable either way - but it's clear that Greece's results are unique to Greece.

Let us not forget that Greece has twice had its debt reduced by half and still cannot support itself even without making any payments. The creditors are not the problem here.

 

[theeedude]

Here is IMF's own staff report:
http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf
Basically it's saying Greece will need a huge write-off ($60B) plus delay in repayments for 20 years, plus reduction in interest rates just to bring Greece to sustainable debt levels, assuming it runs 2.5%+ GDP surplus (fiscal drag) continuously while being in a depression.
Not only is the surplus target absurd, but the creditors aren't even offering the write-off or restructuring of the debt as part of the deal, as one of the creditor's own staff says is inevitable. Instead La Garde is parading around like she knows what she's doing, when she's been wrong about this from the beginning.
Basically, these people are so deep in da Nile, they should get a job as a diver in Egypt.
Look at Greek demands:
- Less fiscal drag and austerity. Every serious economist agrees that austerity has failed, and made things worse in Greece.
- Restructuring and reduction of the debt. Again, one of the creditors' (IMF) own staff says this needs to happen. IMF and other creditors refuse to even talk about it.

On top of that, ECB cut Greek bank access to liquidity to put political pressure on Syriza, and now the banks have failed. So on top of that $60B, now Europe will have to recapitalize Greek banking system, if they want to keep Greece in the Eurozone. And if they don't, then they should just say so, not keep Greece in a depression indefinitely with same eventual outcome.

 

[glenn1]

Here is IMF's own staff report:
http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf
Basically it's saying Greece will need a huge write-off ($60B) plus delay in repayments for 20 years, plus reduction in interest rates just to bring Greece to sustainable debt levels, assuming it runs 2.5%+ GDP surplus (fiscal drag) continuously while being in a depression.
Not only is the surplus target absurd, but the creditors aren't even offering the write-off or restructuring of the debt as part of the deal, as one of the creditor's own staff says is inevitable. Instead La Garde is parading around like she knows what she's doing, when she's been wrong about this from the beginning.
Basically, these people are so deep in da Nile, they should get a job as a diver in Egypt.
Look at Greek demands:
- Less fiscal drag and austerity. Every serious economist agrees that austerity has failed, and made things worse in Greece.
- Restructuring and reduction of the debt. Again, one of the creditors' (IMF) own staff says this needs to happen. IMF and other creditors refuse to even talk about it.

On top of that, ECB cut Greek bank access to liquidity to put political pressure on Syriza, and now the banks have failed. So on top of that $60B, now Europe will have to recapitalize Greek banking system, if they want to keep Greece in the Eurozone. And if they don't, then they should just say so, not keep Greece in a depression indefinitely with same eventual outcome.

Lol, Greece is in no more in a position to issue demands than Japan was after Hiroshima. They will accept the terms offered by creditors or leave the Eurozone. You can no longer use default as a deterrent when the person knows it's inevitable anyway. The only thing that the Greeks have left of value to their creditors is their complete humiliation or unconditional surrender.

 

[fskimospy]

It's worth pointing out that none of the people saying Greece should be loaned more money are stepping forward to loan Greece money. As always, progressive economic policy is best carried out with other people's money. It's also illustrative that those nations with the highest deficits are those in the worst economic shape.

I'm not sure what this means or what you think it means. Also, it is not at all notable that countries in bad economic shape have large deficits, you just might not have a good grasp of which way the chain of causation goes.

Now that Greece has given up pretending to pay its debts, it's free to leverage that supposed primary deficit. Should be nirvana any day now.

I assume you mean primary surplus. It looks like you've just decided to keep up the ideological ranting. Shocking.

 

[theeedude]

Lol, Greece is in no more in a position to issue demands than Japan was after Hiroshima. They will accept the terms offered by creditors or leave the Eurozone. You can no longer use default as a deterrent when the person knows it's inevitable anyway. The only thing that the Greeks have left of value to their creditors is their complete humiliation or unconditional surrender.

Europe doesn't want Greece to leave the Euro-zone.
If Greeks competitively devalue and Greek workers can be hired for half the cost of Italians or Spaniards, then Italy and Spain are not going to be competitive on a relative basis, and then Euro-zone will have contagion, and more problems for ECB, IMF, et al.
They may be prepared for immediate effect of Greek default, but long term, it puts Southern Euro-zone in precarious competitive position, and that's where the major risk is.
The loans are sunk cost, gone either way, pushing unreasonable terms is not going to make money magically appear to repay them.

 

[chucky2]

What would people hire Greek workers for? Would people who would be Greek workers even work at the level necessary to compete with people in other countries?

 

[Jaskalas]

GREECE OUT OF CASH BY WEEEKEND

Greek banks down to €500m in cash reserves as economy crashes
The daily allowance of cash from many ATM machines has already dropped from €60 to €50, purportedly because €20 notes are running out
​

Humanitarian crisis is imminent?

 

[glenn1]

GREECE OUT OF CASH BY WEEEKEND

Greek banks down to €500m in cash reserves as economy crashes
The daily allowance of cash from many ATM machines has already dropped from €60 to €50, purportedly because €20 notes are running out
​

Humanitarian crisis is imminent?

Considering that they have a €2.2 billion/month run rate in government worker salaries, pensions and social security and no money to pay them, I think they'll be reconsidering the wisdom of the creditor offer very soon. Austerity or the collapse of the Greek corruptocracy, either way it's a win for the world and ultimately Greeks themselves.

 

[chucky2]

Damnit Glenn, don't you get it? They need to spend ever more money they don't have because living within their means is improssibuh! If only the EU lends them ever more money over and over, sooner or later, money taken from one group will make another group "perform" better, (but don't worry about the loss from those it was taken from) it will work this time, it, it has too! Pepsi and Cheet, er, Ouza and Gyros for All!

 

[MongGrel]

Let them and get it over with.

GL in the future.

*sees a lot of things getting bought up*

 

[Michael]

Writing off the existing loans may be needed, but Greece has not even done part of what they can. They can sell more assets. They can enforce their existing income tax and VAT rules. They can reform pensions. They can stimulate job creation and real economy.

That need to be done first and then the debt needs to be reset to a sustainable level and not allowed to grow too much.

The reason why austerity is not working at all is that they have no real economy worth speaking about. The other southern countries had a base that they could build off of. Greece has tourism and not much else other than olives.

There is no way they should get relief with becoming an adult nation that makes adult choices.

Michael

 

[theeedude]

What would people hire Greek workers for? Would people who would be Greek workers even work at the level necessary to compete with people in other countries?

Productivity/$ is the relevant metric. Make the $ part small enough by devaluing currency, which Italy and Portugal wouldn't be able to do, and you win.

 

[chucky2]

Productivity/$ is the relevant metric. Make the $ part small enough by devaluing currency, which Italy and Portugal wouldn't be able to do, and you win.

But...you'd still have to hire Greek workers with Greek attitudes. I get what you're saying but exactly what company is going to want to do that when there are so many other low budget options out there? Once an acceptable P/$ value is hit, do you really want to try and get blood out of the olive and all the hassle that will go along with it?

 

[Jaskalas]

But...you'd still have to hire Greek workers with Greek attitudes.

They will soon have no money, no food, no medicine, nothing!
Their attitudes are about to become violently adjusted by a harsh reality. That collapse turns economies third world over night.